Business Law Test 3 Review

After an accident with a vehicle licensed to Guardian Security Company, Heidi signs a covenant not to sue Guardian Security for damages in a tort action if it pays for the damage to her car. This covenant is ?

a bar to recovery if Guardian Security pays

7. State University provides housing on campus and in some adjacent off-campus neighborhoods. To lease a university house or apartment, a person must be student at State. This requirement is?

a condition precedent.

Condition Precedent

a condition that must be fulfilled before a party's performance can be required

Privity of Contract

a contract is a private agreement between the parties who have entered into it, and traditionally these parties alone have rights and liabilities under the contract

Frustration of Purpose

a contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract

3. John enters into a contract with Katie's Coin-op Laundry to move a suite of dryers from one of Katie's locations to another. John subsequently transfers this duty to Loren. Loren is ?

a delegatee

Jeff is seventeen years old. Legally, Jeff is considered?

a minor

Disaffirmance

a minor must express his or her intent, through words or conduct, not to be bound to the contract

Promissory Estoppel

a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery

Condition

a qualification in a contract based on a possible future event

10. Hal's Hardware Inc. and Ideal Tools Corporation sign a written contract for a sale of goods. To be enforceable, this written contract must include ?

a quantity term, such as "50 hammers" or "100 boxes of assorted nails."

Partnering Agreement

a seller and a buyer who frequently do business with each other agree in advance on the terms and conditions that will apply to all transactions subsequently conducted electronically

1. Bea takes out a life insurance policy with Vida Insurance Corporation that names her spouse Wendell as the beneficiary. This is ?

a third party intended beneficiary contract.

Omar and Penn want to discharge their contract by executing a new agreement with performance different from what they originally promised. They can best accomplish this by ?

an accord and satisfaction.

4. Faye makes and sells furniture. Faye and Glen enter into a contract for the delivery of Faye's products to Glen's Gear retail locations for which he agrees to pay the invoiced price. Faye transfers her right to payment under the contract to Haulers Trucking Company. This transfer is ?

an assignment.

2. Lyle and Miranda agree that Lyle will fix the refrigeration unit in Miranda's Buns n' Burgers in exchange for her payment of a debt that Lyle owes to New Credit Corporation. New Credit is ?

an intended beneficiary.

In a bike shop, Jessie, who is not knowledgeable about bikes, overhears Kevin say, "This bike could win any race!" Jessie buys the bike, but does not win any races with it. Kevin's statement is?

an opinion

Builders Corporation files a suit against Concrete Company to enforce a written contract. If the court finds that the parties intended the contract to be the final statement of their agreement, parol evidence can be admitted to prove?

an orally agreed-on condition precedent.

Necessaries

basic needs, such as food, clothing, shelter, and medical services

Anticipatory Repudiation

before either party to a contract has a duty to perform, one of the parties may refuse to carry out his or her contractual obligations

8. Home Construction LLC enters into a contract with Irene to build a house. Before Home starts to work, the market price for its services increases—in effect, Home will lose money by if it fulfills its contract with Irene. Home notifies her that it will not perform. Home's obligation to perform is?

breached

The Uniform Electronic Transactions Act (UETA)

declares that a signature may not be denied legal effect or enforceability solely because it is in electronic form

Latent Defects

defects that could not readily be ascertained

Omni Insurance Company violates a state licensing statute when selling a policy to Petra, in whose state Omni is not licensed to sell insurance. As a member of the class of persons protected by the statute, Petra can ?

do nothing with respect to the policy

Dim threatens physical harm to force Ed to sell his business, Flowers, Inc., to Dim for a below-market price. This is ?

duress

6. Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony?

exchange the car for the $3,000.

At age seventeen, Eve enters into a contract with Fit Health Club. Two years later, when Eve attempts to disaffirm the contract, Fit files a suit against her. The court will most likely consider the contract ratified if it is ?

executed

5. Illya owes Jenny $1,000. In a separate deal, Kasey owes Illya $1,000. Illya unconditionally assigns his rights in the deal with Kasey to Jenny. Illya's right to the $1,000 is then ?

extinguished.

Alice and Bart enter into a contract for the sale of Canyon Ranch. To be enforceable, this contract must be ?

in writing or evidenced by a written memorandum.

Kim promises to pay Leo $500 to install a sump pump in Kim's warehouse. Leo completes the installation. The act of installing the pump ?

is the consideration that creates Kim's obligation to pay Leo.

Bob wants to sell his recreational vehicle (RV) for $21,000. He e-mails Curt with an offer, but mistakenly types that the price is $20,100. Curt accepts the offer and pays Bob $20,100. Bob?

must deliver the RV

Geri is a minor. Without her parents' knowledge, she signs a contract to buy an airline ticket to Hawaii for spring break. Geri's parents are liable for?

no part of the price of the ticket.

3. Air Flo, Inc., and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air- conditioning and heating maintenance for Banyan Grove's facilities for two years. This contract is enforceable by?

none of the choices

Stan, a salesperson for Trucks & Autos, promises Uri a certain car will give him a "smooth ride." Stan offers a test drive, which Uri declines. He buys the car but soon realizes its suspension is in poor condition. Uri can rescind the contract on the ground of ?

none of the choices

Jake and Kline make an illegal contract that unjustly enriches Jake at the expense of Kline. A court will ?

not be concerned with the unjust enrichment of jake

Stephen offers Theresa $1,000 for her collection of rare coins. She accepts. If a dispute arises, a court would likely?

not question the adequacy of the consideration.

7. Carlos and David contract for the sale of five hundred head of Carlos's cattle for $95 per head. Unknown to either party, an unforeseen storm has struck the herd and many of the cattle have died. David is ?

not required to pay due to the bilateral mistake.

Dana believes that a new phone to be sold by Ear Fruit Inc. will become the most popular phone in the global market. Dana enters into a contract to buy 500 shares of Ear Fruit stock, anticipating an increase in its value. The phone does not become popular, and the price of the stock does not rise. Dana can recover ?

nothing

Negligent Misrepresentation

occurs if the party does not exercise reasonable care in uncovering or disclosing facts, or use the skill and competence required by his or her business or profession

Emancipation

occurs when a child's parent or legal guardian relinquishes the legal right to exercise control over the child

10. Quinn contracts to provide ten tons of scrap steel at $500 per ton to Rendered Materials, Inc. An unforeseen shortage of scrap steel suddenly develops, making it impossible for Quinn to fulfill the contract for less than $5,000 per ton. Quinn's best defense against performing the contract would be that ?

performance of the contract is commercially impracticable.

Obligee

person to whom a duty or obligation is owed

Discharge in Bankruptcy

prevents the creditors from enforcing most of the debtor's contracts

Exculpatory Clause

release a party from liability in the event of monetary or physical injury no matter who is at fault

Ross promises to pay Sara, his niece, $5,000 if she obtains her degree at Tech University, where she is in her third year. Sara graduates. Ross is ?

required to pay because Sara obtained a degree at Tech.

At an auction, Benny bids on a 1957 Chevy coupe, believing that it is worth more than the price asked. When the car proves to need more repairs than Benny estimated, and thus is worth less as is, Benny is ?

still liable on the bid.

Innocent Misrepresentation

the aggrieved party can rescind the contract but usually cannot seek damages

2. Ben makes an appointment for a $50 haircut, buys a bike for $250, and agrees to work for Coding Associates for one year for $5,000 per month, starting at the beginning of next month. To be enforceable, a writing is required for ?

the employment agreement

8. Don and Evon orally agree on the sale of Don's Electrical Supplies Company to Evon and jot down the terms on the back of one of Don's blank invoices, which they both sign. A written memorandum evidencing an oral contract that would otherwise be unenforceable must contain?

the essential terms.

Mark fails to reveal a material fact in a business deal with Nancy. This constitutes fraud if?

the fact concerns a serious defect known to Mark but not to Nancy.

Breach of Contract

the nonperformance of a contractual duty

Mutual Rescission

the parties must make another agreement that also satisfies the legal requirements for a contract

Assignee

the party to whom the assignment is made

Obligor

the person who is obligated to perform the duty

5. Maya and Nick enter into a contract. To be enforceable, the contract must include?

the signature of the party against whom enforcement is sought

6. Merl buys a tablet for $500, running shoes for $200, and a set of the Game of Crowns books for $100. To be enforceable as a contract, a writing is required for the purchase of?

the tablet only

shrink-wrap agreement

the terms are expressed inside the box in which the goods are packaged

Delegation

the transfer of contractual duties to a third party

Assignment

the transfer of contractual rights to a third party

Rescission

the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made

Carly pledges to donate $10,000 to Disaster Recovery Inc. (DRI). On the basis of the pledge, DRI orders additional supplies. If Carly does not fulfill the pledge, a court may enforce it?

under the doctrine of promissory estoppel.

Gene, an accountant, convinces his client Hazel to sign a contract to invest her savings in 2Gether, a nonexistent social-networking Web site. There is clear and convincing evidence that Hazel did not act out of her free will. This is?

undue influence

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Remy $5,000 to steal a list of a competitor's clients, to whom Oscar will aggressively market Payroll's services. This deal is ?

void

Condition Subsequent

when a condition operates to terminate a party's absolute promise to perform

Novation

when both of the parties to a contract agree to substitute a third party for one of the original parties

Countrywide Trucking Inc. contracts with Dewey to transport crated goods to a certain destination for $5,000. Countrywide delivers the crates, but Dewey does not pay. Countrywide learns that the crates contained stolen goods. Countrywide can recover from Dewey ?

$5,000, but not the goods.

Integrated Contract (not as important)

(and extraneous evidence (evidence derived from sources outside the contract itself) is excluded.

Bilateral Mistake

- A "mutual understanding concerning a basic assumption on which the contract was made"

The general rule that contracts can prohibit assignments has many exceptions:

- A contract cannot prevent an assignment of the right to receive funds. - The assignment of rights in real estate often cannot be prohibited because such a prohibition is contrary to public policy in most states - The assignment of negotiable instruments (such as checks and promissory notes) cannot be prohibited - In a contract for the sale of goods, the rights to receive damages for breach of contract or payment of an account owed may be assigned even though the sales contract prohibits such an assignment

Executed Contract

- A contract that has been fully performed on both sides - Performance type of contract

Executory Contract

- A contract that has not been fully performed by the parties - Performance type of contract

Accord and Satisfaction

- A debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed

Promise

- A declaration by a person (the promiser) to do or not to do a certain act - An agreement that can be enforced in court - Promiser: the person making the promise - Promisee: The person to whom the promise is made

Usuary

- A lender who makes a loan at an interest rate above the lawful maximum

Elements of Fraudulent misrepresentation

- A misrepresentation of a material fact must occur - There must be an intent to deceive - The innocent party must justifiably rely on the misrepresentation - To collect damages, a party must have been harmed as a result of the misrepresentation

Bilateral Contract

- A promise for a promise - "I will sell you this car if you promise to pay be $20,000"

Unilateral Contract

- A promise for an act - "I promise to pay you if you trim my trees"

Offer

- A promise or commitment to do or refrain from doing some specified action in the future

Contract

- A promise or set of promises - The breach of which the law provides a remedy

Incidental Beneficiary

- A third person who received delegation from a contract even though that person's benefit is not the reason the contract was made

Voidable Contract

- A valid contract but one that can be avoided at the option of one or both of the parties

Acceptance

- A voluntary act by the offeree that shows assent (agreement) to the terms of an offer

***Requirements of a Valid Contract

- Agreement: includes an offer and an acceptance - Consideration: Something of value received or promised, such as money, to convince a person to make a deal - Contractual Capacity: The law must recognize them as possessing characteristics that qualify them as competent parties - Legality: The contract's purpose must be to accomplish some goal that is legal and not against public policy

prenuptial agreement

- Agreements made before marriage that define each partner's ownership rights in the other partner's property

The Mailbox Rule

- Also called the deposited acceptance rule - Under this rule, if the authorized mode of communication is in the mail, then an acceptance becomes valid when it is dispatched

E-signature

- An electronic sound symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record

Extrinsic Evidence

- Any evidence not contained in the document itself--such as the testimony of parties and witnesses, etc.

Adhesion Contracts

- Are written exclusively by one party on a take it or leave it basis

Undue Influence

- Arises from relationships in which one party can greatly influence another party, thus overcoming that party's freewill

Creditor Beneficiary

- Benefits from a contract in which one party promises another party to pay a debt that a third party owes to another party - Intended

Browse-Wrap Terms

- Can occur in transactions conducted over the internet. - Unlike Click-on agreements, these terms do not require internet users to assent to the terms before downloading or using certain software without clicking "I agree" to the terms of a license

Unenforceable Contract

- Cannot be enforced because of certain legal defenses against it

Quasi Contracts

- Contracts implied in law - Are not actual contracts

Contracts that require writing:

- Contracts involving interests in land - Contracts that cannot by their terms be performed within one year from the day after the date of formation - Collateral, or secondary, contracts, such as promises to answer for the debt or duty of another and promises by the administrator or executor of an estate to pay a debt of the estate to pay a debt of the estate personally-- out of his or her own pocket - Promises made in consideration of marriage - Under the Uniform Commercial Code (UCC), contracts for the sale of goods priced at $500 or more

Reformation

- Court usually resort to contract (blank) only when necessary to prevent undue burdens or hardships

Objective Theory of Contracts

- Determines the intent in contract law - A party's intention to enter into a legally blinding agreement, or contract, is judged by outward, objective facts

Covenant Not to Sue

- Does not always bar further recover

Contract Formation: Implied

- Formed by the conduct of the parties

Contract Formation: Express

- Formed by words

Valid Contract

- Has the elements necessary to entitle at least one of the parties to enforce it in court - Those elements consist of: 1) an agreement (offer and acceptance) 2) Supported by legally sufficient consideration 3) Made by parties who have the legal capacity to enter into the contract 4) A legal purpose

Written Contract: The Plain Meaning Rule

- If a court determines that the terms of the contract are clear from the written document alone, this rule will apply, and the contract will be enforced according to what it clearly states

Parol evidence rule

- If a court finds that a written contract represents the complete and the final statement of the parties' agreement, it will not allow either party to present parol evidence

Written Contract: Other rules of Interpretation

- If the court finds that there is a need to determine the parties' intentions from the terms of the contract, the court will apply a number of well-established rules of interpretation.

Contract formation: Unilateral Contracts

- If the offer is phrased so that the offeree can accept the offer only by completing the contract performance - "A promise for an act"

Contract Formation: Bilateral Contracts

- If the offeree can accept simply by promising to perform, - "A promise for a promise"

Liquidated Debt

- If this happens, accord and satisfaction cannot take place - One whose amount has been ascertained, fixed, agreed on, settled, or exactly determined

Donee Beneficiary

- Intended - Ex. life insurance contract - Didnt have anything to do with the contract but do have a right - third party beneficiary

Option Contract

- Irrevocable Offer - Is created when an offeror promises to hold an offer open for a specified period of time in return for payment (consideration) given by the offeree

Unilateral Mistake

- Is made by only one of the parties - Does not give the mistaken party any right to relief from the contract

Methods by which an offer can be terminated: By Operation of Law

- Lapse of time - Destruction of the subject matter - Death or incompetence of the offeror or offeree - Supervening Illegality

Forum-Selection Clause

- Many online contracts contain this - Indicates the forum, or location (such as court or jurisdiction), in which contract disputes will be resolved

Voluntary Consent

- May be lacking because of mistake, misrepresentation, undue influence, or duress

Past Consideration

- No consideration - You can bargain for something to take place now or in the future but not for something that has already taken place

Void Contract

- No contract at all

Factors that strongly indicate that the third party is an intended beneficiary to the contract:

- Performance is rendered directly to the third party - The third party has the right to control the details of the performance - The third party is expressly designated as a beneficiary in the contract

Estopped

- Prevented

Adequacy of Consideration

- Relates to how much consideration is given and whether a fair bargain was reached - Courts will inquire into the adequacy of consideration (if the consideration is legally sufficient) only when fraud, undue influence, duress, or the lack of a bargained-for exchange may be involved

Contract Formation: Formal

- Requires a special form for creation

Contract Formation: Informal

- Requires no special form for creation

Methods by which an offer can be terminated: By Action of the Parties:

- Revocation - Rejection - Counteroffer

Elements of Consideration

- Something of legally sufficient value must be given in exchange for the promise - Legal Value - There must be a bargained-for exchange

If the UETA is enacted without modifications

- State law governs it

Statute of Frauds

- Stipulates what kinds of contracts should be in writing

Discharge

- Terminate

Exceptions to the general rule that all rights can be assigned

- The Assignment is prohibited by statute - The contract is personal - The assignment significantly changes the risk or duties of the obligor - The contract prohibits assignment

Unequivocal Acceptance

- The Mirror Image Rule

Unliquidated Debt

- The amount of the debt is not settled, fixed, agree on, ascertained, or determined, and reasonable persons may differ over the amount owed

Commercial Impracticability

- The anticipated performance must become significantly more difficult or costly

Exceptions to all rights being assigned

- The assignment is prohibited by statute - The contract is personal - The assignment significantly changes the risk or duties of the obligor - The contract prohibits assignment

Voluntary Consent

- The consent of both parties must be voluntary

Form

- The contract must be in whatever form the law requires - Some contracts must be in writing to be enforceable

Preliminary Agreement

- The courts are holding that this type of agreement constitutes a binding contract if the parties have agreed on all essential terms and no disputed issued remain to be resolved - In contrast, if the parties agree on certain major terms but leave other terms open for further negotiation, this type of agreement is not binding

Contractual Capacity

- The legal ability to enter into a contractual relationship

3 Elements for an offer to be effective:

- The offerer must have a serious intention to become bound by the offer - The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract - The offer must be communicated to the offeree

Revocation

- The offerer's act of revoking, or withdrawing May be accomplished by either of the following: - Express repudiation of the offer (such as "I withdraw my previous offer of Oct. 17th) - Performance f acts that are inconsistent with the existence of the offer and are made known to the offeree

Delegatee

- The part to whom the duties are delegated

Agreement

- The parties must agree on the terms of the contract and manifest to each other their mutual assent (agreement) to the same bargain

Assignor

- The party assigning the rights to a third party

Delegator

- The party delegating the duties

The basic requirements for performance to qualify as substantial performance as follows:

- The party must have performed in good faith - The performance must not vary greatly from the performance promised in the contract - The performance must create substantially the same benefits as those promised in the contract

Forbearance

- The refraining from an action that one has a legal right to undertake

Duress

- The use of threats to force a party to enter into a contract constitutes this

Consideration

- The value given in return for a promise (in a bilateral contract) or in return for a performance (in a unilateral contract)

Concurrent Conditions

- These are present when each party's performance is conditioned on the other party's performance or tender of performance (offer to perform)

Alienation

- Transfer of land ownership

Age of majority

- When a person is no longer a minor

Duties that cannot be delegated:

- When special trust has been placed in the obligor or when performance depends on the personal skill or talents of the obligor - When performance by a third party will vary materially from that expected by the obligee - When the contract expressly prohibits delegation

Parol Evidence Inadmissible Exception

- When terms are ambiguous - Subsequent modifications - Void/voidable - Incomplete K - Prior dealings - Conditions precedent

Intended beneficiary

- the third party has legal rights and can sue the promisor directly for breach of contract

Requirements to Establish Promissory Estoppel

-Must be a clear and definite promise -Promisee must justifiably rely on the promise -Promisee reasonably relied on the promise by acting or refraining from some act -The promisee's reliance was definite and resulted in a substantial detriment -Justice will be served by enforcing promise

Examples of Agreements that Lack Consideration

1) Preexisting Duty - When a person already has a legal duty to perform an action, there is no legally sufficient consideration 2) Past Consideration - When a person makes a promise in return for actions or events that have already taken place, there is no consideration 3) Illusory Promises - When a person expresses contract terms with such uncertainty that the terms are not definite, the promise is illusory

A release will generally be binding if it meets the following requirements:

1) The agreement is made in good faith (honestly) 2) The release contract is in a signed writing (required in many states) 3) The contract is accompanied by consideration

Objective Facts may include:

1. What the party said when entering into the contract 2. How the party acted or appeared (intent may be manifested by conduct as well as by oral or written words) 3. The circumstances surrounding the transaction

The requirements of a novation are as follows:

1. a previous valid obligation 2. an agreement by all parties to a new contract 3. the extinguishing of the old obligation (discharge of the prior party) 4. a new contract that is valid

The Legally Sufficient Value

1. a promise to do something that one has no prior legal duty to do 2. the performance of an action that one is otherwise not obligated to undertake 3. the refraining from an action that one has a legal right to undertake

Mirror Image Rule

A common law rule that requires the offerer's acceptance to match the offeror's offer exactly -- to mirror the offer

Release

A contract in which one party forfeits the right to pursue a legal claim against the other party.

Covenant not to compete

A contractual promise of one party to refrain from conducting business similar to that of another party for a certain period of time and within a specified geographical area.

Ambiguity

A court will consider a contract to be unclear in the following situations: - When the intent of the parties cannot be determined from the contract's language - When the contract lacks a provision on a disputed term - When a term is susceptible to more than one interpretation - When there is uncertainty about a provision

impossibility of performance

After a contract has been made, supervening events (such as a fire) may make performance impossible in an objective sense.

Tender

An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.

Car Lot's salesperson Dick offers to sell Ernie, who is twenty years old, a car. Dick intentionally misrepresents the vehicle's use and repairs. In reliance, Ernie buys the car. To prove fraud, Ernie does not have to show that?

Ernie is under twenty-one

7. Henry files a suit against Irrigation Services to enforce an oral contract that would otherwise be unenforceable under the Statute of Frauds. The court could enforce such a contract if ?

Henry foreseeably and justifiably relied on Irrigation's promise

Essay Questions: IRAQ

Issue Rule Application- how does the law apply to the issue and the facts Conclusion

4. Nate promises to pay for dental services provided by Otto to Polly. Nate receives no personal benefit for the promise. To be enforceable, the promise must be in writing if ?

Nate promises to pay only if Polly does not pay.

Unconscionable

So grossly unfair or oppressive that it would shock the conscience of the court

If the UETA is enacted with modifications

State law governs if: - The state's procedures or requirements are consistent with the E-sign Act - The state does not give priority to one type of technology - The state law was enacted after the E-sign Act and refers to it The E-Sign Act governs if: - The modifications are inconsistent with the E-Sign Act

Ratification

The act of accepting and giving legal force to an obligation that previously was not enforceable.

Click-On Agreement

The courts have concluded that the act of clicking on a box labeled "i accept" or "i agree" can indicate acceptance of an online offer.